The pound is sliding for the 11th consecutive day as speculation mounted that a recession will force the Bank of England to cut interest rates.

The pound's 11-day fall to $1.857 is the longest run of declines in at least 33 years and the currency is now down 6.5 per cent since the end of July.

Since Wednesday when Mervyn King, Governor of the Bank of England, admitted there was a possibility of a recession and the number of people claiming unemployment benefit rose at the fastest rate in 16 years, speculation has hardened that the Bank's Monetary Policy Committee will be forced to cut interest rates before the end of the year.

The 11-day run is the longest since 1975, according to data from Reuters, However, research by Bloomberg suggested that it was the longest run since at least January 1971. The currency, poised for a 3.4 per cent decline in the week, is now at more than a two-year low.

Against the euro, the pound strengthened to 79.37p, compared with 79.28p.

The Bank of England now believes the UK economy will expand about 0.1 per cent on a year-on- year basis in the first quarter of 2009, compared with a previous prediction of 1 per cent.

Growth has tailed off as house prices plunge and the property market came to a "virtual standstill" in July, according to the Royal Institution of Chartered Surveyors.

However, inflation running at 4.4 per cent, the highest for 16 years, has limited the Bank's ability to reduce interest rates to revive the economy.

"Already this summer we are seeing the start of what we believe is going to be an aggressive move lower in yields and also the pound as the bearish developments in asset markets and the economy continue to overwhelm,'' Citigroup Global Markets' currency strategy team said in an investor report yesterday.

At the same time, there are fresh signs that the six-year commodities boom may be over as gold plunged below $800 an ounce, silver dropped as much as 12 per cent and oil, corn and copper slumped.

The strengthening dollar has caused the sharp contraction in commodity prices.

Palm oil tumbled as much as 9 per cent, and rubber and wheat also fell as the dollar headed for its longest winning streak in more than two years and on concern that a spreading global economic slowdown will reduce demand for raw materials.

Commodities, measured by the Standard & Poor's GSCI index, have tumbled 21 per cent since they reached a peak on July 3.

Oil is now at its lowest price for more than three months, gold for eight months and silver for almost a year. Copper and corn reached six-month lows this week.

Gold has fallen 23 per cent from its record $1,032.70 an ounce on March 17 and silver has slumped 40 per cent from its $21.3550 peak the same day.

Analysts said that investors were moving away from commodities, believing that the Federal Reserve was resolved to fight inflation in the US by raising interest rates, which would push up the dollar.

Goldman Sachs said the dollar had "bottomed" against the euro, citing weakening global growth, declining oil prices and an improved US trade balance.

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